I am a Lecturer in Economics at the University of Sussex, where I joined the
Department of Economics
in September 2020. Before that, I was a postdoctoral researcher at the
University of Amsterdam.
In May 2019, I completed my PhD at the
University of Amsterdam
and the
Tinbergen Institute,
under supervision of
Cars Hommes
and
Joep Sonnemans.
My main research fields are behavioral and experimental economics,
with a focus on experimental macroeconomics and finance. I make use of
controlled laboratory experiments to study the interactions between
individual behavior in market settings (e.g. price expectations or
production decisions) and the resulting market outcomes (e.g. asset or
commodity prices). My experimental studies can be used to validate and
develop behavioral models, and to design and test policy interventions.
Please see my CV for more information about my education, research and teaching experience.
My academic references are:
Prof. Cars Hommes, University of Amsterdam (c.h.hommes@uva.nl)
Prof. Joep Sonnemans, University of Amsterdam (j.h.sonnemans@uva.nl)
Prof. John Duffy, University of California, Irvine (duffy@uci.edu)
Prof. Nobuyuki Hanaki, Osaka University (nobuyuki.hanaki@iser.osaka-u.ac.jp)
Managing bubbles in experimental asset markets with monetary policy
(with Cars Hommes – forthcoming in
Journal of Money, Credit and Banking)
Link to paper
We study the effect of a "leaning against the wind" monetary policy on asset price bubbles
in a learning-to-forecast experiment, where prices are driven by the expectations of
market participants. We find that a strong interest rate response is successful
in preventing or deflating large price bubbles, while a weak response is not. Giving
information about the interest rate changes and communicating the goal of the policy
increases coordination of expectations and has a stabilizing effect. When the steady state
fundamental price is unknown and the interest rate rule is based on a proxy instead,
the policy is less effective.
Coordination on bubbles in large-group asset pricing experiments
We present a large-group experiment in which participants predict the price of an
asset, whose realization depends on the aggregation of individual forecasts. The
markets consist of 21 to 32 participants, a group size larger than in most experiments.
Multiple large price bubbles occur in six out of seven markets. The bubbles
emerge even faster than in smaller markets. Individual forecast errors do not cancel
out at the aggregate level, but participants coordinate on a trend-following prediction
strategy that gives rise to large bubbles. The observed price patterns can be
captured by a behavioral heuristics switching model with heterogeneous expectations.
Experiences and expectations in asset markets: an experimental study
This paper presents experimental evidence that experienced price patterns in asset
markets have a large impact on expectations and thereby affect the (de)stabilization
of asset prices in the future. In a controlled learning-to-forecast experiment,
subjects first experience a stable or a bubbly asset market before entering into a
same- or mixed-experience market. In markets where all subjects experienced stability,
convergence to the fundamental price is faster. Bubble formation is faster in markets
where all subjects experienced bubbles. In mixed-experience markets, dynamics can go
both ways: prices either stabilize or destabilize. Heterogeneity in expectations is
larger when more subjects have experienced bubbles before.
Planar learning-to-forecast market games
(with Cars Hommes
and Eva Levelt –
work in progress: preparing manuscript)
In this project, we investigate how expectation formation in a two-dimensional market
experiment depends on the eigenvalues of the underlying model. A motivating example
of such a model is the New Keynesian framework. Our results suggest that eigenvalues
can be used as predictors for the stability of equilibria. In the case of positive
real eigenvalues we observe a change from stable to unstable dynamics inside the
unit circle. Complex eigenvalues result in more stable dynamics than their real
counterparts. We compare our findings to various theories of expectation formation
and develop a more sophisticated two-dimensional version of the heuristics switching
model to explain the observed dynamics.
Import tariffs in coupled cobweb markets
Although free trade is typically believed to maximize allocative efficiency, a decrease
in barriers to trade is not necessarily welfare enhancing. Recent theoretical work
on coupled cobweb markets has shown that switching between markets by firms may lead
to instability and perpetual price fluctuations that are detrimental to welfare and
that do not occur when these markets are isolated. Our experiment empirically tests
the effect of import tariffs on price volatility and welfare in coupled cobweb markets.
Subjects play the role of firms and decide on how much to supply in their home country
and abroad; an import tariff τ is charged on units sold abroad. We consider four
treatments: free trade (τ=0%), two levels of import tariffs (τ=20% and τ=30%), and autarky (τ=80%). Our
results suggest that a reduction in tariffs indeed increases price volatility in
both markets, and we can reject the prediction that total surplus increases as tariffs
decrease.
Online 30-day asset market experiment
We plan to run a large-scale online asset market learning-to-forecast experiment, in which
subjects predict the price of an asset on the next day for 30 consecutive days. The
realized price is based on the prediction of all subjects in a certain market, and
subjects are paid according to forecasting accuracy. The aim of this project is threefold.
First, the online setup allows us to form exceptionally large markets of 250 subjects,
which we compare to small markets of 15 subjects. Second, we investigate whether spanning
the experiment over multiple days affects forecasts and market dynamics, compared to
typical 2-hour lab experiments. Third, we gain experience with and thereby explore the
possibilities for conducting large-scale incentivized group experiments.
- Email
-
m.hennequin@sussex.ac.uk
- Address
-
Department of Economics, University of Sussex Business School
Jubilee Building 261
University of Sussex
Brighton
BN1 9SL
United Kingdom